Trade Surpluses and Life-Cycle Saving Behaviour

University of Iceland; University of London - Birkbeck College; Centre for Economic Policy Research (CEPR)

Abstract

The national-income account identity and the life-cycle theory of consumption together imply that the current account should be a function of the age structure. A country with a high proportion of young and retired should have current account deficits. Using a panel of 84 countries, we find empirical support for this hypothesis.

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